Islamic Economics

ASSIGNMENT OF ISLAMIC ECONOMICS TOPIC ECONOMIC IMPLEMENTATION OF REDISTRIBUTIVE MEASURES OF ISLAMIC SOCIETY WITH REFERENCE TO PAKISTAN REDISTRIBUTION OF WEALTH Redistribution of wealth is the transfer of income, wealth or property from some individuals to others caused by a social mechanism "such as tax laws, monetary policies, or tort law". Most often it refers to progressive redistribution, from the rich to the poor, although it may also refer to regressive redistribution, from the poor to the rich. The desirability and effects of redistribution are actively debated on ethical and economic grounds. It holds pivotal role in economic growth. In fact it appears that whole economy is based on the concern to make the economy just and stable. The objective of moderate income redistribution is to avoid the unjust equalization of incomes on one side and unjust extremes of concentration on the other sides. Today, income redistribution occurs in some form in most democratic countries, most commonly through income-adjusted taxes (in which the amount of tax paid is directly connected to one's income), some of which goes to fund welfare programs to assist the poor[neutrality is disputed] , or to all of society. Progressive income taxes are a widely used method of income

ECONOMICS OF DISTIBUTION OF WEALTH The economics of distribution signifies the sharing of wealth produced by a community among the agents, or the owners of the agents, which have been active in its production. The theory of distribution is thus concerned with the evaluation of the services of the factors of production like land,labour ,capital and enterprise, and distribution of the rewards among them. But here we are not concerned with economics of distribution rather we are concerned with social distribution of wealth which means fair and even distribution of wealth amongst the members of a community. If distribution of wealth in a community is unfair, unjust and inequitable, the social peace is always at stake and the conflict between the haves and have-nots results in bloody revolutions. Pockets of prosperity cannot survive in oceans of poverty and, therefore, fair and equitable distribution of wealth is vital to a community for its peace, well-being and ultimate prosperity. ISLAM AND REDISTIBUTION OF WEALTH Economic system of Islam makes utmost endeavours to maintain redistribution of wealth on just and benevolent basis and to provide means sustenance to every member of society in a dignified manner. Islam enjoins that man should earn and spend wealth through lawful means and spend it 1 on his personal needs 2 invest in a lawful business

3 give it away to others so that they may meet their needs Islam takes various social , institutional,legal and moral steps to ensure just distribution of wealth on maximum scale and circulation of wealth through all classes of the society . If the wealth remain in few hands than many people will be deprived of their rights and concentration of wealth is created . Basic aim of Islam, as we have already stated earlier, is to ensure well-being (Falah) of its followers in this world and in the Hereafter, and also to establish brotherhood among the members of the Muslim community (Ummah). This aim cannot be achieved if distribution of wealth among the members of Muslim...

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CONTENTS REDISTRIBUTION OF WEALTH ECONOMICS OF DISTRIBUTION OF WEALTH ISLAM AND REDISTRIBUTION OF WEALTH OBJECTIVES OF REDISTRIBUTION OF WEALTH ACCRODING TO ISLAM MEASURES TO STOP CONCENTRATION OF WEALTH BENEFITS OF ZAKAT FOR PAKISTAN ZAKAT DISADVANTAGES IF ZAKAT IS NOT IMPLEMENTED PROPERLY IN PAKISTAN EXAMPLE OF IT INTEREST RATE OF INTEREST ISLAM AND RATE OF INTEREST BENEFITS FOR PAKISTAN IF IT IS IMPLEMENTED PROPERLY DISADVANTAGES IF RATE OF INTEREST IS THERE IN PAKISTAN CONCLUSION REFERENCE

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...Introduction:
In Islam, fixing the price of commodities is not allowed as the increase of the price is caused by practice of supply and demand in the market. Hence in this case, benchmarking for the products is not allowed. It is can be reflected from of the Hadith of Prophet Muhammad S.A.W.
Narrated by Anas Ibn Malik,
“The people said: Apostle of Allah, prices has shot up, so fix prices for us. Thereupon the Apostle of Allah (PBUH) said: “Verily, Allah S.W.T. determines the climate of economic affluence and gloom. I do not want to take any action to fix the prices because I do not want, later in hereafter, any among you to demand for the return of your property and blood from me because of my tyranny (in fixing the prices).”
In the above hadith, the practice of fixing price is clearly condemned by Prophet Muhammad S.A.W. The Prophet S.A.W declared the act of fixing price as injustice towards the seller if the price is fluctuated due to the normal market forces.
But the second school of taught disagree with not fixing the price. They argued that the fluctuation in the price of commodities at the time of Prophet Muhammad S.A.W was due the normal market forces i.e. supply and demand of the commodity in the market. But nowadays the prices fluctuate more due to seller’s speculation rather than supply and demand of the product. In this case the price of the commodities should be fixed by the authorities. Hence benchmarking in this case is allowable by the...

...﻿ISLAMICECONOMIC SYSTEM
Definition of Economics
A. Ibnu Khaldun’s Definition
Economics is the study of humankind’s civilization and human association. It also refers to activity related to humankind’s livehood, its development, progress and prosperity. The economic problem resides in efforts spent by people to obtain earnings that they used to satisfy their needs and necessities, for refinements and luxuries, and for acquisition and possession. Hence we can conclude that Economics is the study of human efforts in obtaining resources and using them, through exchange, for the fulfillment of necessities, needs and refinements as well as for the purpose of acquisition.
What is IslamicEconomic System?
Several definitions of Islamiceconomics are ventured by Muslim Economist :
A. Hasanuz Zaman
Islamiceconomic system is the knowledge and application of injuction and rules of the Shari’ah that prevent injustice in the acquisition and disposal of material resources in order to provide satisfaction to human beings and enable them to perform their obligations to Allah and the societies.
B. Zaidan Abu al Makarim
Islamiceconomic system is the sciences that deal with wealth and its relation to man from the point of view of the realization of justice in all forms of economic...

...life which offers its own social, political and economic systems to guide human behavior in all spheres of life. History has recorded that the economic system of Islam, for the first time in the world had established social and economic justice during the period of al-Khilafah al-Rashidah. In any ideal Muslim society, socio-economic justice is considered as one of the most significant characteristics for the social, political, and economic as well as all realms of human interaction. Exploitation and any source of unjustified enrichment in Islam are prohibited. The Holy Qur’an has emphatically instructed Muslims not to acquire each other’s property wrongfully. Islam is not an ascetic religion. It takes a positive view of life as the natural outcome of the belief that human beings are the vicegerents of Allah (Swt).
The conditions for interest/riba has been laid down as increase in principal amount and increase with respect to payment period, the more period causes more increase. Interest/riba has been categorized into two types. After describing interest/riba and its types, reasons have been sought for prohibition of interest/riba from Quran referring to Surah Al-Rum-39, Surah Al-Nisa-161, Surah Al-Imran 130-2 and Surah Al-Baqrah 275-281. Help from Hadith (Muslim, Ahmed, Tirmidhi and Ibn-e-Majah) has also been sought. Interest/riba generates various evils like moral evils, social evils and...

...Islamic Banking vs. Conventional Banking
In most Islamic countries, they tend to practice two types of financing in banking industry which are conventional and Islamic banking. The country like in Malaysia has successfully developed an Islamic banking system that operates in parallel with the conventional banking system. There is similarity between conventional banking and Islamic banking which helps to promote economic growth provided financing services such as credit facilities for business activity, mortgage, securities, etc. in order to achieve their same ultimate profit objectives. However, there are also having differences in practicing financial services due to most investors having their own preferences on their investments and business activities which they may involve in Islamic banking or conventional banking. The three main differences between Islamic bank and conventional bank are in term of rules and regulations, concept of money lending and products and services.
“Malaysia is one of the unique countries which operate a dual banking system where the Islamic banking system operates in parallel with the conventional banking system” (Haron & Azmi, 2008, p.619). By the way, Islamic bank has more restrictions on rules and regulations compared to conventional bank. Islamic banking principles are unique and based...

...Different between Conventional bank and Islamic bank
GENERAL DIFFERENCES
There are many differences between conventional and Islamic bank. In conventional bank, money is a product besides medium of exchange and store value. The design of conventional bank is based on interest. They are charging higher interest rate on capital. The functions and operating modes of conventional banks are based on fully manmade principles. In conventional bank, they thought that interest rate give biggest profit for them. They assume that the interest rate is lawful and valid. Conventionally, interest or the excess (increase) in loan is the consideration or compensation for the period of re-payment of loan. The difference between the maturity value of old and new debt amounts to riba. It may be noted that the conventional system of time-based compounding of debt clearly falls in this category. (Obaidullah, 2005)
In Islamic bank, real asset is a product and money is just a medium of exchange. Profit on exchange of goods and services are the basis for earning profit. So, they not charge interest (riba). Literally, riba means increase or addition, expansion and growth. Riba is prohibited in Islam. In the other words, riba refers to an increase in the amount of debtor owes his creditor due to passage of time.
DEPOSIT
On the other hand, based on deposit, the only difference in conventional and Islamic banking lies in sharing...

...February 2011
Differences and Similarities in Islamic and Conventional Banking
Muhammad Hanif
Assistant Professor, National University of Computer & Emerging Sciences, Islamabad
PhD-Finance Scholar at International Islamic University, Islamabad, Pakistan
E-mail: muhammad.hanif@nu.edu.pk
Abstract
Islamic Banking is growing at a rapid speed and has showed unprecedented growth and expansion in last two
decades in spite of mismatching of existing financial framework and business practices. By the end of 2008
volume of Islamic banking has reached to US $ 951 Billion with operation in more than 50 countries. Middle East
is the centre of Islamic banking with contribution of approximately 80% while 20% share is contributed by rest of
the world. In Pakistan Islamic banking is at infant stage although last 6 years growth is marvelous. Islamic
banking has grown at an average annual rate of 76% in the last six and half years (12/03 - 06/10) in Pakistan.
Although Islamic banking faces multi challenges however three of them are very vital for its existence. First is
Sharia compliance in its operations in an environment which is dominated by interest based practices even in
Muslim societies. Second is perception of financial industry practitioners about its performance whether the
system is able to serve the total needs of trade and industry. Third is the...

...Some scholars in Islamiceconomics argued that the concept of time value of money is a key to the door or riba which is prohibited in Islam. However, some scholars are of the opinion that time value of money is a concept valid in Islamiceconomics. What are your opinions on this issue?
DISCUSSION:
Islam prohibits riba because riba deprives justice and discourage people from undertaking real economic activities. Profit earned from money that is loaned to debtor is considered as interest or usury. Riba gives a picture that money itself can earn profit (in the form of interest) by lending it to who needs it. The Quran forbids the charging of interest or riba on money lent. There are general consensus among Shariah economic scholars that riba is not only restricted to usury but encompasses interests as well.
Legally, from the Islamic belief, riba is strongly condemned by Allah. Allah said in the Quran “O you who believe, do not consume riba with redoubling and protect yourself from God, perchance you may be blissful.” (Al-Imran: 130). Islam does not recognize the earning from interest or riba derived from loan/borrowing activity was a fair business transaction.
Capitalist economic considers money as commodity and a resource for production. Therefore it has value or cost which is determined by several factors such as time preference for consumption, production...

...﻿INTRODUCTION
Islamic finance system has its basis in great Islamic value. It is Riba-free system ( Riba means interest) which ensures the abolition of profit-sharing from the whole financial system.
Islamic Finance System (IFS) can be categorized with absence of ,
Interest based transactions
Interest based financial institution
Unethical and doubtful transactions
Companies’ stocks involved in unlawful activities
Market manipulation
And so on and so forth.
Islamic Financial System is opposite of Conventional financial System i.e system which is based on interest/Riba. The Riba based financial system has been proven as inefficient for the economic balance which is needed in any society. The conventional banking is also of 2 types ; Socialistic and Capitalistic. In Socialistic system , government gets to enjoys freedom whereas in capitalistic system, individuals get to enjoy freedom. But in the light of Shariah in Islamic finance system, restrictive freedom is allowed for both government and individuals. In Islamic finance system, solutions of economic problems are derived from Al-Qur’an and from A hadith of Prophet (S.A.W).It focuses on providing economic opportunities in the society by keeping in consideration political, social and other cultural factors.
ISLAMIC FINANCE SYSTEM
Islamic finance is defined as ;
“ A...